Home Depot (HD) also releases earnings this week as retail dominates in the United States.
HD – Weekly Chart
The stock has found the $333 level to be a stubborn resistance over the last three months, and traders should look for a possible correction.
Home Depot’s Q4 earnings are projected to be $3.26 per share, which would be up 1% year over year. Sales for the quarter are expected to be $35.9 billion and flat from the previous year.
Home Depot’s dividend yield is currently 2.37% which tops Walmart’s 1.55%, with both above the S&P 500’s 1.18%. A lot of the upside potential for the stock will depend upon the guidance it can offer, which will give further insight into consumer behavior.
A headwind for Home Depot could be falling home sales as the retail outlet focuses on homeware and housing upgrade products. Sales of U.S. homes slumped nearly 18% in 2022, the slowest year for the housing market in almost a decade.
That could lead to a gloomy outlook from Home Depot’s management for the months ahead. Mortgage rates more than doubled in 2022 to a twenty-year high of 7.08% as the Federal Reserve continued to hike interest rates to cool inflation. That could weigh on Home Depot customers as higher inflation may cause them to put home upgrades on hold. Visits to Home Depot dropped by 14.4% in November 2022, compared with the same period in the prior year.
JPMorgan analyst Christopher Horvers said: “We believe HD remains one of the best long-term stories in retail given company-specific sales and margin initiatives, the duopoly/AMZN-resistant nature of the industry, and significant financial and operating leverage that amplifies EPS growth in better sales environments.”
Barclays was more cautious about the company with Seth Sigman, saying that Home Depot had “too much short-term top-line uncertainty, in our view”.
